Magazine article Risk Management

Come on in. the Water's Fine. How One Insurance Pool Used Outsourcing and Technology to Improve Efficiency

Magazine article Risk Management

Come on in. the Water's Fine. How One Insurance Pool Used Outsourcing and Technology to Improve Efficiency

Article excerpt

In the past few years, public agencies have hit hard times. In addition to budget cuts and increased financial pressure, they cope with significant risks and unique exposures. As a result, it has been difficult for these entities to obtain coverage in the traditional insurance market. With a scarcity of coverage, an expansion of exclusions, increased premiums, liberal case law and catastrophic losses on the magnitude of Hurricane Katrina, many agencies have chosen to join forces, uniting their risks and resources together into insurance pools.

Golden State Risk Management Authority (GSRMA) is a primary example of public agencies in a risk-sharing insurance model. Established in 1979, Golden State offers a full line of programs--including liability, workers compensation, and property policies--that cover the unique exposures of public entities throughout California. GSRMA currently covers 139 members, such as cemetery districts, fire districts, school districts, counties, cities and special districts (water, sewer and lighting). These districts employ 2,100 employees and more than 500 paid and volunteer firemen. Total employee payroll exceeds $62 million a year and combined insured property is valued at more than of $180 million.

Although it has a relatively large membership and sophisticated programs, Golden State only employs seven people. Yet this small pool has been able to successfully replace traditional insurance in this niche market of public agency coverage, all while providing its diverse membership with a comprehensive spectrum of claims, risk management and loss prevention services. How can such a small force conquer a rather insurmountable task? Golden State's strategy is to focus on member services as a key priority, use Internet technology to bridge the geographic distance among members, and outsource specific business functions to expand its member offerings.

An Outsourcing Strategy

Today, many corporations have embraced outsourcing as a means of reducing costs, increasing operational efficiency and expanding operations. The risk and insurance industry is no different.

Roughly half of all insurers currently outsource one or more business processes or plan to do so in 2006. For small to mid-sized organizations like GSRMA, outsourcing has leveled the playing field, allowing these organizations to effectively offer the same services, and to benefit from the same technologies as their larger counterparts, all while avoiding the costs of building infrastructure.

"We are constantly looking for new and innovative ways to improve services to our members," says Scott Schimke, executive director and risk manager of GSRMA. "By keeping our members at the center of our business strategy, we keep our internal resources focused on personalized customer service, claims management as a critical touch point with customers, and loss prevention as a key opportunity to help members reduce risks."

All other business functions were areas in which GSRMA did not possess "core" expertise and could subsequently outsource to external vendors. Golden State's outsourcing strategy has proved effective in regard to its workers comp claims process and, specifically, these four functions:

* initial reporting and triaging of injuries

* aggressive return-to-work programs

* management of a "one-system" solution to handle claims management, medical bill review and loss analysis

* management of an Internet-based community and interactive online tools to link and engage members in loss prevention

GSRMA carefully selected vendors that would serve as seamless partners in its claims process, while delivering additional value and benefits to members. Another key component to this outsourcing strategy was to make sure each vendor utilized advanced technology and automation, such as document-imaging, auto-population of data fields and web-based technology to streamline workflow. …

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